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Umair Muhammad from Vancouver-based think tank Generation Squeeze in Ottawa July 6, 2022.Blair Gable/The Globe and Mail

When Umair Muhammad’s family immigrated to Canada from Pakistan in 1997, saving for a down payment on a home was an attainable dream. His father – the family’s sole full-time earner – returned to school to complete an undergraduate degree and start over careerwise, but the family was able to buy a house within three years, using savings and money borrowed from relatives.

But 25 years later, despite holding two degrees, Mr. Muhammad says that same goal is no longer within reach for his young family, even though it is a two-earner household.

“I’m in my mid-30s and I can’t say that I own a home or that I will any time soon,” said Mr. Muhammad, a researcher for Vancouver-based housing think tank Generation Squeeze. “I’ve committed to being a perpetual renter. Talking to my parents, they find it puzzling.”

Saving for a down payment has always been a hurdle, but in recent years it has become an almost insurmountable barrier for many Canadians, taking much longer to come up with, according to several estimates.

While house prices in Toronto and Vancouver are currently falling from pandemic highs, down 4.5 per cent and 2 per cent in June from the previous month, it’s not enough to make up for the price inflation that now forces middle-class Canadians to save for many more years than they did a decade or two ago.

Estimates range from seven to 17 years – and that number varies widely from city to city.

According to statistics from National Bank of Canada, a family earning the national median household income – $78,000 a year – would need 6½ years to save a minimum down payment of about $50,000 on the average house, which now costs $771,407.

That’s up sharply from the 40 months it would take in 2012. The same was true in 1982 and 1992, when Canada experienced inflated housing prices. But in 2002, as a result of changes to down payment and mortgage requirements, the time required to save for a down payment was just over two years.

For the sake of comparison, National Bank averages assume a savings rate of 10 per cent of pre-tax annual median income, which National Bank adviser David Truong says is based on Statistics Canada numbers. It does not include returns and compounding interest on the savings. The average house cost includes both condos and other housing types.

However, in Canada’s hottest markets, the time it takes to save for the average down payment has risen more significantly.

In Toronto, a buyer earning the annual median household salary of $87,847 would now need 336.6 months – about 28 years – to save the average down payment. In 2012 it was just 47 months; 31 months in 2002; and 65 in 1992.

Similarly, in Vancouver, it would now take the average household 30 years to save for a down payment. Until recently, Vancouver was the most expensive city in Canada, requiring 67 months of saving in 2012, 36 in 2002 and 77 in 1992.

These large increases are largely a result of minimum down payment requirements set by the Canada Mortgage and Housing Corporation. According to CMHC rules, mortgages on houses costing more than $1-million cannot be insured, so buyers are required to put a down payment of 20 per cent – a minimum of $200,000 – whereas all home purchases previously required a down payment of just 5 per cent. In the past few years, the average house price in many major markets has crossed that million-dollar threshold.

The 5-per-cent minimum still applies to houses costing less than $500,000, which are almost unheard of in Toronto and Vancouver but can still be found in cities such as Calgary, where the average home price is just over $460,000. In such a case, the average down payment is just $23,100, requiring 31 months – about 2½ years – of saving, assuming a median income of $89,000. That number has remained relatively constant for the past 30 years.

Calgary has the highest home-ownership rate, 73 per cent, while Montreal has the lowest rate at 56 per cent. In Montreal, where the average house price is just over $500,000, buyers only need about 42 months – 3½ years – to save for a down payment, compared with 32 months in 2012 and just 19 in 2002.

In 2006, CMHC introduced a “zero down payment” mortgage, but it was repealed in 2008 amid concerns that Canadians were borrowing too much against the rising value of their homes. That’s when the minimum 5-per-cent down payment was introduced.

In 2015, that was raised to 10 per cent for the portion of a house worth more than $500,000. If a house is worth less than $1-million, buyers will also be required to buy mortgage insurance, which can range from 2.8 per cent to 4 per cent of the mortgaged amount.

Average home prices in selected cities

In thousands of dollars

Q1 1982

Q1 1992

Q1 2002

Q1 2012

Q1 2022

$1,400

1,200

1,000

800

600

400

200

0

Toronto

Vancouver

Canada

avg.

Montreal

Calgary

THE GLOBE AND MAIL, SOURCE: NATIONAL BANK OF

CANADA'S HOUSING AFFORDABILITY MONITOR

Average home prices in selected cities

In thousands of dollars

Q1 1982

Q1 1992

Q1 2002

Q1 2012

Q1 2022

$1,400

1,200

1,000

800

600

400

200

0

Toronto

Montreal

Vancouver

Calgary

Canada

average

THE GLOBE AND MAIL, SOURCE: NATIONAL BANK OF CANADA'S

HOUSING AFFORDABILITY MONITOR

Average home prices in selected cities

Q1 1982

Q1 1992

Q1 2002

Q1 2012

Q1 2022

$1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0

Toronto

Montreal

Vancouver

Calgary

Canada

average

THE GLOBE AND MAIL, SOURCE: NATIONAL BANK OF CANADA'S HOUSING AFFORDABILITY MONITOR

Mr. Muhammad’s think tank, Generation Squeeze, does its calculations using a savings rate of 15 per cent, instead of National Bank’s 10 per cent, and assumes a constant 20-per-cent down payment for the sake of comparison, instead of the 5-per-cent minimum.

It says it currently takes the average Canadian 17 years to save for the average Canadian house, up from 11 years in 2012, seven in 2002 and five in 1976. In Toronto or Vancouver, it takes 27 years on average, up from about 10 in 2002.

Even saving 15 per cent has become increasingly difficult, as the cost of living continues to rise across the country in conjunction with inflation and interest rates. Meanwhile, earnings among young people have remained stagnant and in many cases are not keeping up with inflation, Mr. Muhammad said.

He spends a lot of time looking at research and data on housing unaffordability. While he said he and his partner are happy with their current situation – renting an affordable apartment in Ottawa – he still often feels disappointed.

The data, he said, makes it clear: “Housing is increasingly out of reach, especially for younger people and for newcomers in Canada.”

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